CUSTOMER SATISFACTION-PSYCHOLOGY , SURVEY & ANALYSIS

CUSTOMER SATISFACTION-PSYCHOLOGY , SURVEY & ANALYSISPRESENTATION BY:SAKSHI BAJAJ (29-MBA-2008)SHIVANI RANA (32-MBA-2008)

1CONTENTSThe Psychology Of Customer SatisfactionDesigning Customer Satisfaction SurveyAnalysing Customer Satisfaction Survey2THE PSYCHOLOGY OF CUSTOMER SATISFACTION

3OverviewA customer has all the votes and hence, its extremely important to understand the psychology of a customer and why they choose to do what they do.

In the services context we are primarily interested in what makes a customer satisfied enough to come back.

Thus, we aim at understanding how the customer perceivesthe reality, and how he feels about it.

The depth of feeling can range form mild (satisfaction) to extreme (delight), resulting from the degree to which the customers perception of the service meets or exceeds his expectation.4Perception and realityDue to the basic characteristics of services, the perceived quality matters far more than the objectivequality of the service. For e.g- if a restaurant customer perceives the restaurant is too cold, it does little good for the matter to argue that the thermometer says 74F.

However the perceived quality of customer cannot be taken as the true indicator of its quality.

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Time elementWhen viewed in long term, the perceived quality does not tend to converge on objective quality, when objective aspects are more important and if they become known.

Time element is important when there are repeated transactions over time, the customer is able to evaluate the service not based on single encounter but on multiple experiences.6Satisfaction an emotional response ~ Contentment (the phone works) ~ Surprise (i won the lottery!) ~ Pleasure (the wine is good) ~ Relief (the dentist has finished drilling)

And perceived quality does influence satisfaction.

However merely saisfying the customer is not enough to produce customer loyalty. Businesses need to move beyond mere satisfaction, to customer delight

As perceived quality is a rational perception, satisfaction is an emotional reaction. Satisfation states may include:

7Customer delight Delight refers to going beyond the expected and generating better outcomes to result in highest level of satisfaction.

Delight is possible only if the customer is satisfied to begin with.

Delight leads to behavioural outcomes that are substantially better than mere satisfaction can provide. These include:

~ Repurchase ~ Positive word-of-mouth ~ Customer loyalty and devotion

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Expectations Satisfaction and delight are both strongly influenced by customer expectations.

Expectations array of possible outcomes that reflect what might, could, will, should, or had better not happen.

Expectations are strongly influenced by : ~ Experience ~ Advertising ~ Word-of-mouth ~ Personal limitations9Expectation hierarchy10Expectancy Disconfirmation (GAPS)The importance of disconfirmation in explaining satisfaction has been demonstrated in many contexts, including sales force interaction, restaurant services, security transactions, telephone service and the like.

11Here perceived quality is higher than expected. This situation will usually result in satisfaction and will almost always result in expectation being raised.Perceived qualityWill expectation Positive disconfirmationLevel of quality 12Perceived quality is not as good as expected. This situation will result probably in dissatisfaction, and will very likely result in lowered expectations of serviceWill expectation Perceived quality Negative disconfirmationLevel of quality 13The satisfaction process ExpectationsDisconfirmationPerceivedQualitySatisfactionFutureExpectationsObjectiveQuality14Value QualityPriceValue +-Perceived value drives purchase and repurchase. Value is formed by the relation ship between quality and price .

Higher the quality, higher the value.

Higher the price lower the value..15Utility and choiceEconimic utility is a useful way to visualise the relationship between quality, value and choice.

Utility function varies with the individual and this helps explain why people differ in their decisions.

The concept of value has been used to represent this tradeoff between quality and price. Viewed from an economic utility point of view: value = utility of quality disutility of price

Choice is then based primarily on getting the best value.16The utility of qualityUtilityQuality17The disutility of priceDisutilityPrice18The disutility of price- individual differences (there exist market segments in terms of quality)DisutilityPriceAPoor PersonRich Person19Uncertainity in expectationsExpected LikelihoodDistribution Of OutcomePerson 1 : ExperiencedPerson 2 : Inexperienced20Downside riskPeople generally find the potential losses from worse-than-expected outcomes to outweigh the potential gains from better-than-expected outcomes i.e a worse-than-expected outcome hurts more than a better-than-expected helps.

In the graph, its clear that the person#1 is more positive because of the less downside risk because of his experience.

Hence,under some circumstances its perfectly rational for a person to choose an option that is actually expected to be worse (on avg.), if the downside risk for that option is less

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Thus, as experience increases, knowledge about the service increases, and the distribution of expected outcomes tightens up .

Downside risk is reduced, and probablity of repurchase increases, even if the perceived quality is only what was expected.

In other words, customers often appear loyal when they are being rational and avoiding risk.22Thus , when managing customer satisfaction and putting together customer satisfaction surveys, its useful to remember that:The customers perception is what counts. Measure that.Satisfaction is not the same as perceived quality.Quality perceptions are rational. Satisfaction is emotional.Delight is more than just complete satisfaction.Expectations vary across individuals and change over time.Disconfirmation is most important driver of satisfaction.Value = utility of quality disutility of price.Expectations have distributions, which change shape with experience.Customers avoid downside risk by displaying loyalty.These psychological principles help produce an effective customer satisfaction survey.23DESIGNING CUSTOMER SATISFACTION SURVEY

24Overview Surveys are used to determine the extent to which customers are satisfied and delighted, and the extent to which this influences customer retention.

These are also useful in pin-pointing the processes and subprocesses within the company where resources should be targeted.

The findings are used to improve the business processes and to monitor progress and identify areas of further opportunity.

25Customer satisfaction survey process26Preparing to surveyPurpose first we need to be clear about why the survey is being conducted. Identifying and priotizing the goals helps in providing a framework.

Ensuring buy-in top management must agree with the purpose of research, and share the understanding of what actions will result from the survey.

Exploratory research this phase, prior to framing of questionnaire, ensures that the issues covered by the questionnaire are relevant to the customer.27Sampling Choosing the sample population current customers , prospective consumers along with the former customers that have left are a good source of obtaining useful information. They help in identifyin the previous mistakes they have committed and the future expectations of the customers.

Comparison with competitors knowledge of the competition helps in identifying strengths and weaknesses of the service providers.

Drawing the sample a probability sample needs to be drawn. Probability samples can be : ~ simple random sample ~ systematic random sample Techniques such as stratified sampling, cluster sampling and quota sampling are used.28Data collection Mode of data collection ~ telephonic surveys ~ Mail surveys ~ Personal interviews ~ Interactive media (internet) ~ comment cards

To overcome the limitations of each of the above methods, avoiding personal biases and making the investment worthwhile , an outside researcher or company can be commissioned to administer the questionnaire.

29Wording Wording of the items is crucial to the questionnaires success.

The questionnaire must reflect the language of the customer & not the jargon of the company.

Decide what mix of closed -end & open-end questions to use.

30Unnecessary QuestionsThese include:Expectations questions: indicates performance versus expectations.Ex.: Please rate the level of quality you expected

Importance questions: concentrate on issues important to customers.Ex.: How important is airline safety to you? Very Somewhat Neutral Somewhat Very imp important Unimp Unimp0Very poor10Excellent31Questionnaire Structure32Other IssuesQuestionnaire length: As a rule of thumb, a questionnaire should not be longer than about two pagesHow often to survey: One rule of thumb is that the interval of measurement should be roughly equal to the time it takes to implement a quality improvement effortPromise of confidentiality or anonymity should be maintainedEthics should not be violated

33ANALYZING CUSTOMER SATISFACTION SURVEYS

34OverviewThe primary purposes of analyzing customer satisfaction surveys are:Give management a better idea of how satisfied customers arePinpoint areas in which customer satisfaction improvement is likely to generate desirable customer behaviorsStatistical methods can be used to find out whether solving problems or adding extras has the larger affect.35Predicting Repurchase IntentionIt has a direct link to customer retentionIf the information is collected as a percentage , we may see an immediate link to market share & profitabilityOverall satisfaction & delight relate to repurchase intentionEx.: Effect of overall satisfaction & delight Repurchase Intention Delighted95.2%Merely Satisfied84.7%Dissatisfied31.3%

Effect of delight = .952 - .847 = .105Effect of satisfaction = .847 - .313 = .534

36Predicting Overall SatisfactionIt involves analyzing satisfaction data from the business processes.For separating the effects of satisfaction & delight, we create two new variables a satisfaction variable & a delight variableThese variables are referred as dummy variables & their value is either 0 for no or 1 for yesConverting satisfaction scores to dummy variablesScoreSatisfaction DummyDelight Dummy1 (dissatisfied) 002 (satisfied)103 (delighted)1137Predicting Overall SatisfactionContinued

Generally, missing data exist in the data set. Strategies for dealing with them are:List-wise deletionMean substitutionData imputation38Predicting Overall SatisfactionContinuedRun regression analysis :Bi-variate approach: Taking one predictor variable at a time. Ex.: Relating Billing satisfaction with the overall satisfaction

Multi-variate approach: Uses Equity estimator that takes the multicollinearity of the predictors into accountEx.: Relating Billing, Sales, Product & Repairs satisfaction with the overall satisfaction; all at once

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Predicting Overall The approach here is similar to predicting overall satisfaction, with one key exception.It is possible to delight only a customer who is already satisfied.Therefore, dissatisfied customers should be deleted from the analysis.

Delete all cases for which overall satisfaction = 0

40Predicting Process Satisfaction

Here, the process dimensions satisfaction is related to the overall process satisfaction.

This can be done by using:Bivariate regression: Ex.: relating Billing accuracy with Billing satisfactionEquity estimator regression: Ex.: relating Billing accuracy & whether bill is easy to understand with Billing satisfaction 41Predicting Process DelightAgain, we must take out the respondents who are not prospects for delight.

Delete all cases for which process satisfaction = 0Bivariate regressions can be used to determine relative impact of the predictors

42Estimating Relative ImportanceMeasure of importance must reflect not only the size of the statistical link, but also how many customers will be affected.Ex.: Complaint recovery process. Suppose regression analysis shows moving customers from dissatisfaction to satisfaction has large impact on customer retention. Suppose we also know that only one-tenth of one percent of customers ever had a complaint.The results of bivariate or mulitvariate regression analysis is used for calculating relative importance.

CALCULATING RELATIVE IMPORTANCE: BIVARIATE METHODBivariate R20.4% cases present90%Importance (0-100)3643Importance Performance MappingThis approach argues that we should be most concerned about those issues for which the importance is high and our performance is poor.

We measure performance as either percent satisfied, or percent of satisfied who are delighted.Ex.:

44Importance Performance MappingContinued

The processes are mapped in the quadrants as shown:

Importance-Performance in driving satisfaction: quadrant map

45Importance Performance MappingContinuedSimilarly, quadrant map can be drawn for importance- performance in driving delight

46Importance Performance MappingContinuedComparison shows that the satisfaction quadrant map may be very different from the delight quadrant map.

Apparently something right is done to delight repair customers, even though there is some trouble getting the customers satisfied in the first place.47

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